US & Canada

Obama unveils plans to cut US deficit

  • 19 September 2011
  • From the section US & Canada
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Media captionBarack Obama: "Warren Buffett's secretary shouldn't pay a higher tax rate than Warren Buffett"

US President Barack Obama has outlined plans to reduce the US deficit and to kick-start economic growth.

At the White House, he proposed cuts to healthcare benefits but said business and the wealthy must pay higher taxes.

He unveiled a plan to save more than $3tn (£1.9tn) over a decade that would pay for his plan to boost jobs, with roughly half coming from tax increases.

Republicans in Congress, who oppose tax rises, quickly criticised the plan, which they say will not boost jobs.

"Pitting one group of Americans against another is not leadership," House of Representatives Speaker John Boehner said.

Divisions reopened

In a televised address from the Rose Garden at the White House, Mr Obama said that if the US did not act now, the burden of debt would fall on future generations.

"Washington has to live within its means," Mr Obama said. "We have to cut what we can't afford, to pay for what really matters."

Among the plans are proposals to cut some $250bn of spending on Medicare - the healthcare programme for the elderly.

But that proposal came with a caveat - a promise from Mr Obama that he would veto any bill eventually passed by Congress that cut healthcare but did not include new taxes on the rich.

Republicans were quick to respond to the speech.

House Speaker Boehner, whom Mr Obama singled out in his speech for having "walked away" from a "grand bargain" during the debt-ceiling debate in July, said the president's approach was unhelpful.

"This administration's insistence on raising taxes on job creators and its reluctance to take the steps necessary to strengthen our entitlement programmes are the reasons the president and I were not able to reach an agreement previously, and it is evident today that these barriers remain," he said.

Senate Republican leader Mitch McConnell said the president's combination of "veto threats, a massive tax hike, phantom savings, and punting on entitlement reform is not a recipe for economic or job growth - or even meaningful deficit reduction".

'Buffett rule'

Mr Obama said the wealthy and corporations should pay their "fair share" to cut the deficit.

"Middle-class families shouldn't pay higher taxes than millionaires and billionaires," he said. "It's hard to argue against that."

Mr Obama suggested a "Buffett rule", which would see Americans who earn more than $1m pay the same rate of tax as those who earn less.

The proposal refers to billionaire financier Warren Buffett, who has complained that he and his wealthy peers pay relatively less tax than the people who work for them.

Many high-income Americans benefit from tax loopholes that see earnings on investment taxed at lower rates than wages.

On Sunday Republican Paul Ryan, chairman of the House budget committee and a proponent of deep cuts and no tax rises, described Mr Obama's plans as "class warfare".

The president referenced Mr Ryan's criticism on Monday, justified his tax-and-cut package by saying simply: "It's not class warfare, it's math."


Mr Obama began the speech describing the proposals as "finishing what we started this summer".

In July, Mr Obama and Republicans in Congress clashed over a vote on the debt ceiling limit.

The political back and forth resulted in a last-minute formation of a deficit-reduction "super-committee" of lawmakers.

That panel, made up of six Democrats and six Republicans, is seeking $1.5tn in spending cuts to offset a rise in the debt ceiling agreed in the summer.

Mr Obama's latest plans will also go before the committee, which is not obliged to accept the president's ideas.

The debt-reduction proposals are the latest part of a growing package of plans from the Obama administration.

In early September, Mr Obama outlined a $447bn job-creation proposal in front of a prime-time joint session of Congress, vowing that new spending would be paid for as part of the latest deficit-reduction plan.

Correspondents say that Mr Obama is staking out his position on the economy in advance of the presidential race in 2012.

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